Credit Suisse & Nomura Warn of Losses After Hedge Fund Fire Sale


Credit Suisse shares slid 10% at the open following the warning that it may face a significant loss in the first quarter related to an unnamed US hedge fund client defaulting on margin calls.

March 29, 2021 | AtoZ Markets Credit Suisse Group AG warned Monday that it may face a significant loss in the first quarter related to an unnamed US hedge fund client defaulting on margin calls, the latest blow to the Swiss lender after a string of recent hits.

The Zurich-based lender said that while it is too early to quantify the exact size of the loss, “it could be highly significant and material to our first quarter results,” according to a statement Monday. Credit Suisse said it and other banks are exiting positions related to the client.

Credit Suisse shares slid 10% at the open following the announcement.

Earlier, Nomura also issued a trading update on Monday warning of a “significant loss” at one of its U.S. subsidiaries resulting from transactions with a client stateside. That’s related to the unwinding of trades by Bill Hwang’s Archegos Capital Management, according to people familiar with the matter.

Japan’s largest investment bank said it was evaluating the potential extent of the loss, estimated at $2 billion.

Its shares fell 16% on Monday.

Hwang’s New York-based firm is at the center of a margin call that led to the forced liquidation of more than $20 billion in shares on Friday, according to people familiar with the transactions. Among the sales were shares of ViacomCBS Inc., GSX Techedu Inc., Baidu Inc. and Discovery Inc.

The family office founded by Hwang, a former Tiger Management trader, was one of Nomura’s prime brokerage clients, one of the people said, without providing further details. They asked not to be identified discussing private information. Other prime brokers include Credit Suisse, Morgan Stanley and Goldman Sachs Group Inc., one of the people said.

A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks,” Credit Suisse said. “Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions.”

The potential loss is the latest blow to the Swiss bank, already reeling from the Greensill scandal and the write-down on a hedge fund stake and other hits in 2020.

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